A theory is developed for a two-layer inertial model of the Gulf Stream. Both layers are in motion, but it is assumed that the ratio of the geostrophic drift in the lower layer to that of the upper layer is small. Approximate analytical solutions are obtained under this assumption. In addition, a criterion for the existence of inertial boundary currents is established. An important result is the prediction of deep and surface countercurrents to the east of the high velocity part of the Stream. These are due to the effect of bottom topography. Another important result is that the interface at the coast comes to the surface at a lower latitude if the deep water is in motion, and that the intersection of the interface and the sea surface extends out to sea in a northeasterly direction from the coast. The theory of the flow near the line of zero upper layer depth is as yet incomplete.DOI: 10.1111/j.2153-3490.1968.tb00391.x